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Sonja McGill Offers Tips for Employers on Recruiter.com In Advance of Forthcoming FLSA Changes

Bell Nunnally Senior Counsel Sonja J. McGill is featured in the Recruiter.com article titled, “FLSA Changes Are Coming: Is Your Staffing Model Ready?”

The piece explores the July 2015 notice of rulemaking by the Department of Labor (DOL), which signaled that it was seeking to make changes to exempt classifications under the Fair Labor Standards Act (FLSA) – an act it administers. The FLSA established the national minimum wage, overtime pay eligibility, recordkeeping and child labor standards. Notably, the DOL does not need Congressional approval to make changes to the FLSA. Rather, it announces a proposed set of rules, seeks public comment and publishes the revised rules which then go into effect.

The DOL, working around Congressional gridlock, is seeking to address overtime pay eligibility. “Exempt” employees are salaried and generally considered ineligible for overtime, whereas “non-exempt” employees are paid on an hourly basis and eligible for overtime pay. However, many employees do not neatly meet either definition, and fall somewhere in the middle.

At present, the FLSA salary test is $455/week or $23,660 a year, meaning that employees making this amount or less are eligible for overtime pay. The proposed regulations will raise these numbers to $970/week, or $50,440 a year.

An unanswered question for employers is whether the DOL will seek to change the “Duties” test for employees, with some speculating that the agency may seek to adopt the “California test.” In California, if employees spend greater than 50 percent of their time doing non-exempt work, they are considered non-exempt. This is why assistant managers in the retail and restaurant industries are classified as non-exempt and considered salaried plus overtime.

According to the Office of Management and Budget, the new FLSA rules become effective in July – meaning employers have only four months left to prepare.

The piece offers the following tips for employers:

  1. Review your current job descriptions and make sure they realistically state the job duties. Update them accordingly to make sure that your employees are properly classified.
  2. Determine whether/how to keep current salaried employees exempt from overtime.
  3. Design alternative FLSA compliant pay plans if you need to convert employees to non-exempt status. For example, utilize salaried + overtime classifications if possible.

And, it offers these thoughts on potential impacts to staffing models:

  1. Transition to a part-time field management structure. This obviously creates more complex management requirements, but it’s also an opportunity to give millennials the flexibility they crave and enhance your communication processes.
  2. Increase general managers’ scopes of duty and salaries to encompass several outlets instead of just one.
  3. Make sure you’re fully staffed with hourly employees. Remember, if you’re understaffed, your managers are probably doing work that falls into the category of non-exempt duties.
  4. Carefully manage scheduling at both the corporate office and field locations to avoid overtime costs.
  5. Consider implications to your bonus plans. If a bonus component is based on overtime management, you may be forcing your managers to perform non-exempt work, especially if they’re understaffed.
  6. Don’t forget that the DOL is also reviewing independent contractor statuses, so make sure you factor delivery people, IT team members, and contract recruiters into your 2016 labor budget.

One additional dimension employers should be aware of, according to the article, is that a change in payroll deductions could change the status of an employee and potentially expose an employer to DOL action.

It concludes by noting that the changes to the FLSA may seem complex, but adaptable and informed organizations can weather the changes and succeed.

To read the full article, please click here.

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